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Wi-Fi part three: Municipal networks spark Wi-Fi war in Washington

Across the U.S., city-sponsored plans to provide low-cost wireless Internet access have sparked opposing pieces of legislation in the House and the Senate. H.R. 2726 would prohibit municipal governments from offering telecommunications, information or cable services, while S.B. 1297, the Community Broadband Act of 2005, would preserve and protect the ability of local governments to provide broadband capability and services. Which proposal will triumph in the Wi-Fi war? Considering that co-sponsors of the Community Broadband Act sit on both sides of the aisle, politics alone probably won't decide the victor. Public opinion may have a stronger say.

2006-03-01

Dueling legislation in t­he U.S. House and Senate may affect municipal Wi-Fi deployments now being planned and implemented. Last May, U.S. Rep. Pete Session, R-Tex., introduced House Resolution 2726 "to prohibit municipal governments from offering telecommunications, information or cable services." A few weeks later, Sen. Frank Lautenberg, D-N.J., introduced Senate Bill 1294 — the Community Broadband Act of 2005. That legislation would "preserve and protect the ability of local governments to provide broadband capability and services." Clearly, the two proposed laws go head-to-head, but which will triumph in the Wi-Fi war? Considering that co-sponsors of the Community Broadband Act sit on both sides of the aisle, politics alone probably won't decide the victor. Public opinion may have a stronger say. The broadband battleground The circumstance that has prompted recent legislation on municipal Wi-Fi is an equally recent proliferation of citywide broadband projects. During 2005, nearly four dozen cities issued requests for proposals on municipal Wi-Fi networks, reports muniwireless.com. Glenn Fleishman, editor of Wi-Fi Net News, has predicted that "hundreds of new RFPs will appear" in 2006. These aren't small, local hotspots Fleishman is talking about. The Wi-Fi deployments ahead are for some of America's larger cities, including San Francisco, Minneapolis, Portland and, as of Feb. 17, Chicago. Philadelphia's Wi-Fi network, which is being built and run by Atlanta-based Earthlink, will cover 135 square miles. Racine County, Wis., is looking for a vendor to build, own and operate a network that will cover 333 square miles. "Anyone who's trying to sell Internet service privately is going to see municipal Wi-Fi as competition, and it is," says Gerald Keim, management professor at the W. P. Carey School of Business. At least, municipal Wi-Fi is a threat if you're not the ISP picked to build and operate the network. Most cities are partnering with some private entity to offer public access, such as Earthlink's arrangement with the city of Philadelphia. "Wireless Philadelphia's goal is to provide citywide low-cost access," Dianah Neff, the city's chief information officer, told members of the Senate Commerce Committee on February 14. Similarly, Tempe, Ariz., awarded a five-year contract to Bethesda, Md.-based MobilePro Corp. The company will build and operate a system that will be free to city workers and offered to residents on an annual, monthly, daily or hourly basis, according to Tempe's web site. Corpus Christi, Tex. created a nonprofit agency to own and operate the network that its prime contractor, Los Angeles-based Northrop Grumman, is building. The nonprofit agency will "sell the use of the network back to the city," says Leonard Scott, business unit manager for the management information systems department in Corpus Christi. Scott notes that the city expects to use about 40 percent of the network capacity for public works and public safety. "The nonprofit will wholesale the excess bandwidth to existing service providers," he says, adding that those ISPs will make their own deals with end-use customers. "We want to stay out of that business." Telco protest Not surprisingly, a representative of USTelecom, the United States telecommunications association, also shared Wi-Fi views with members of the Senate in February. "Government-owned networks are not akin to other public utilities," said Douglas Boone, president of Premier Communications and a representative of USTelecom. "Government networks are more akin to City Hall opening a chain of grocery stores or gas stations," he maintains. One of Boone's beefs is the tax treatment cities enjoy. "Municipalities usually don't pay taxes on property and assets used for this kind of thing, which puts the municipality at an advantage vis-à-vis the corporation," says Keim. Boone also maintains that because municipalities don't have market pressure, they're less likely to innovate. "That's a very good argument," Keim says. "Generally, when you restrict competitive pressure, you reduce not only the incentives for innovating but also the incentives for high-quality customer service." Keim uses the U.S. Postal Service as an example. Before private companies like FedEx and UPS started nosing in on USPS turf, "most people pointed to the post office as an example of an inefficient government service," Keim says. Competition prompted service improvements in that agency, he adds. However, Keim also points out that limited-term contracts for municipal Wi-Fi networks would set up conditions requiring vendors to keep up with technological developments or risk getting kicked out. The re-bidding process, he says, "creates competitive pressure for the existing supplier to continue to perform well, innovate and be responsive to consumer interests." At bottom, though, Boone maintains that municipal Wi-Fi deployments erode market share for incumbent Internet- and telephone-service providers. How much do Telcos and ISPs stand to lose? That depends. "The real threat Telcos face from free or low-cost municipal Wi-Fi hangs on the quality of service the city provides," says Ward. "For a fair number of people, Wi-Fi just isn't fast enough," says economist Tracy Clark, associate director of the Bank One Economic Outlook Center at the W. P. Carey School of Business. "Those people will probably keep paying for DSL or cable." Clark adds that municipal Wi-Fi may "slow down the growth trajectory for some companies and increase cost-per-person of the infrastructure they've laid down." Yet another threat: voice-over-Internet phone connections, or VoIP. Tempe's Web site brags that the coming Wi-Fi network will be robust enough to handle VoIP phone service.  James Ward, a W. P. Carey professor of marketing, has noticed increased usage of this technology among students, whom Ward believes "tend to be early adopters of consumer communications technology." According to Ward, once early adopters embrace a technology, use of that technology is likely to rise. "If I were a telephone company, this would be worrisome," he says. Who wins? The picture isn't bleak for all businesses, Ward claims. "Consider this: With free or low cost municipal Wi-Fi, the Internet audience will expand and that will mean people who sell advertising on the Internet can probably charge more for it," he says. He further notes that as the Internet becomes a more attractive advertising medium, it will facilitate the shift to online commerce. That, in turn, "will support the whole infrastructure of the Net in terms of web site development and what services are offered." Ward also admits that he's all for citywide Wi-Fi. "Socially speaking, access to the Internet is a key to educating yourself, to career progress and to being integrated with the rest of the world," Ward says. "Why wouldn't a forward thinking government want its citizens to have access to this resource?" Some say Internet access is in the public interest, hence governments should be involved. "Public interest is a phrase I never use," says Keim, who notes that the phrase is hard to define. "It's not as though you can go to the mountain and get a tablet that tells you 'the public-interest' policy position on any issue that would arise," he says. According to Keim, it is often the people who are the best organized and who feel most intensely about an issue who are able to convince policymakers one way or the other. As an example, he points to dairy industry lobbies that, in some states, have managed to shepherd through regulations that raise the price of milk. A 10-cent increase in the per-gallon cost of milk could mean a huge jump in profits for a farmer, he says, but for the family that only drinks a gallon a week, it's a mere $5.20 increase in annual costs. "How much hell would you raise for $5.20?" he asks. Keim explains that consumers, having less to lose, also are less likely to be organized and educated in debates like this. It is the group with an interest in policy — in this case, dairy farmers — who would be organized enough to lobby lawmakers and, perhaps, influence policy decisions. The situation is similar in the Wi-Fi ruckus. "Municipalities have faced considerable resistance from the big telecommunications and cable companies, such as Verizon and Comcast," Anne Broache, a staff writer for CNETnews.com, wrote on Feb. 14. She adds that opponents to municipal Wi-Fi say, "Private companies are better suited than government bureaucrats to serve the public's needs." Public opinion may diverge. At the same time, public opinion doesn't always count for much in policy debates, Keim says. He points out that throughout the 1980s, polls regularly showed a majority of people favoring handgun restrictions. Still, the Brady bill was defeated six times before it passed, in part because those polled were not as vocal or organized as, for instance, members of the National Rifle Association. On the municipal Wi-Fi front, "Voters of Lafayette, La., rejected an effort to limit their high-speed options by a margin of 62 percent to 38 percent," notes a Feb. 13 letter from the Community Broadband Coalition to the Senate Commerce Committee. Iowa voters rejected limits on their Wi-Fi options, as well. According to Keim, even when powerful groups — like cable companies or Telcos — have a policy view, there are some issues that have such broad public appeal, business lobbyists might not be successful. "I notice everyone backs away from Internet taxation," Keim observes. "It may be that so many people enjoy the Internet in its current form, no lawmakers want to meddle with it and run the risk of having that being made a campaign issue by an opponent." Keim adds that "there are a very small number of issues where public opinion really matters a lot" to policymakers. That said, he also notes, "The Internet may be one of them."

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